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EUR/USD Forex Signal: Cautiously Optimistic -

Bullish View

  • Buy the EUR/USD pair and set a take-profit at 1.1360.

  • Add a stop-loss at 1.1200.

  • Timeline: 1-2 days.

Bearish View

  • Set a sell-stop at 1.1260 and a take-profit at 1.1200.

  • Add a stop-loss at 1.1350.

The EUR/USD declined and then quickly erased those losses on Wednesday after the relatively hawkish Federal Reserve decision. The pair is trading at 1.1288, which is a few points above this month’s low at 1.1225.

ECB Decision

This week, the focus among traders is on central bank decisions. On Wednesday, the Federal Reserve decided to leave its interest rate unchanged. It also hinted that it will implement two rate hikes in 2022. This will be the most hawkish year since 2018 when the bank boosted rates four times.

The Fed also announced that it will continue winding down the quantitative easing program. In it, the bank has been buying Treasuries and government bonds worth $120 billion per month. In November, it decided to reduce these purchases by $15 billion.

And on Wednesday, the bank said that it will reduce purchases by $30 billion in each of the coming months. The program will therefore end in March.

The next key catalyst for the EUR/USD will be the interest rate decision by the European Central Bank (ECB) that will come out on Thursday. Analysts expect that the bank will exercise caution during this meeting because of the cloudy outlook of the Eurozone economy.

Recent economic numbers from Europe shows that the bloc’s key countries like Germany and France are doing well. Other smaller countries are struggling considering that some key subsectors are not doing well.

At the same time, the bloc is going through a new wave of the Covid-19 pandemic even though most people are now vaccinated. Delta has been the dominant variant in Europe although many people are experiencing the Omicron variant.

Therefore, the ECB is expected to leave its interest rate unchanged and then continue with its asset purchases program. The EUR/USD will also react to the latest flash manufacturing and services PMIs.

EUR/USD Forecast

The EUR/USD pair has been little changed in the past few days. The pair is trading at 1.1286, where it has been in the past few days. The pair is at the same level as the 25-day moving average. It has also formed a symmetrical triangle pattern that is shown in black.

The pair is a few points below the standard pivot point while the MACD has moved upwards. Therefore, the pair will likely rise ahead and after the ECB decision.